Finance confirms that the intention of the s. 15(2.17) rule is to limit the imputation of a shareholder loan to Canco to the amount of Canco’s advance
USCo and Canco deposit $100 and $50, respectively, into a cross-border third–party notional cash pool structure under which two affiliated non-residents (LuxCo and UKCo) each have a $60 overdraft. Each of Luxco and UKCo, as the intended borrowers, would be considered to have received a loan from Canco of $50, so that there is a deemed shareholder loan of $100 under s. 15(2.17) even though Canco only advanced $50.
Finance indicated that in these circumstances, the intention of the back-to-back shareholder loan rules is to limit the aggregate amount of loans that Canco is deemed to make under those rules, to the amount that Canco has lent to the immediate funder. This is consistent with the general policy of the rules, which is to ensure that the shareholder loan rules are not avoided to the extent that a Canadian corporation provides debt-funding to its shareholders indirectly through one or more intermediaries.